DWP consults on contracted-out pension scheme transfers

In December 2017 the Government launched a consultation exercise on a set of draft regulations which, if brought into effect, would allow bulk transfers of pension scheme members’ benefits, without their consent, from former contracted-out schemes to schemes that have never been contracted-out.

Bulk transfers without consent have traditionally been a useful option for companies on business sales, reorganisation of company structures or for costs saving economies of scale where an employer has a number of legacy schemes.

Currently, transfers of members’ benefits accrued in a former contracted-out scheme can only be made without their consent when the receiving scheme is also a former contracted-out scheme and there is an employment connection between the schemes.

Before the cessation of contracting-out in 2016, a bulk transfer to a scheme that had never been contracted-out could be facilitated by the receiving scheme contracting-out temporarily. The cessation of contracting-out means that option is no longer available and employers with both former contracted-out schemes and schemes that were never contracted-out are prevented from taking advantage of the bulk transfer without consent regime.

The proposed regulations would enable any salary related occupational pension rights to be transferred, without member consent, to a scheme that had never been contracted-out, subject to certain conditions.

The consultation period ended on 17 January and it is envisaged that, subject to the result of the consultation, the new regulations will come into effect in April 2018.